Quote du Jour on the Housing Anti-Bubble

Here is my favorite quote (from a BMO Nesibitt economist) today on the latest figures showing a rapidly dimishing euphoria in the housing market. Today’s data has prices off a record 9.7%, but, hey, volume is up:

“September’s results show the market works — if builders cut prices enough, people will buy.”

That is a combination of stating the blindingly obvious and finding a very silver lining. Let’s just call it a blindingly silver (and silly) statement.


  1. It’s impossible to determine conclusively that those numbers were driven by pricing. Other analysts think it’s a mix shift. I tend to think it’s the latter.

  2. If the criticism is aimed at the depth of the analyst’s insight, fine. But I think the fact prices are declining dramatically, and volume is up, is a fairly healthy development. Much of the concern voiced about long-term consequences from house price declines comes from the experience of Japan, where the stickiness of pricing meant they had to suffer through a decade plus of largely real estate driven deflation. If we instead suffer a sharp correction, and the excess supply finds its way into occupant hands at prices that represent legitimate value (i.e. much lower than prices on which builders had been assuming when they made land commitments), it will portend a much better long-term outcome, both for the US and for the homebuilding industry. Sometimes the most banal of comments hide (perhaps unintended) insight :-)

  3. My take from a marketing perspective is that once you start buying your customer’s business, you’ve stumbled down a slippery slope that will hamper future margin growth. Sales volume means squat without commensurate margin. Off topic it reminds me of Amazon.com’s warcry from the dot-com bubble “We lose money on every transaction, but we make it up on volume!”
    As it happens I was just blogging about these housing factoids from another angle this morning.